News Corp. COO: If we lose Aereo lawsuit, Fox may stop broadcasting

TV networks have waged several high-profile legal battles against services trying to stream their content over the Internet without a license. Mostly, the networks have succeeded: FilmOn and ivi TV were recent casualties.

But the networks have lost two major legal battles that open up a door for new, legal services: first the Cablevision case over the remote DVR, and just last week, the appeals court decision ruling that Aereo doesn't infringe copyright. Aereo has "hacked" copyright law by creating a service that uses thousands of tiny antennas, with one corresponding to each subscriber. By putting the subscriber in total control of what content gets redistributed, Aereo is in the clear. It charges subscribers $8 a month to watch New York broadcast TV over the Internet.

Judging from comments made today by the chief operations officer for News Corp., Chase Carey, the Aereo loss must really sting. Speaking at the National Association of Broadcasters in Las Vegas, Carey said the subscription revenue that his company, which owns Fox Broadcasting, gets from cable companies is absolutely vital. If it gets robbed of that cashflow because of the Aereo case, it might actually get out of the free-TV business.

"We simply cannot provide the type of quality sports, news, and entertainment content that we do from an ad-supported only business model," said Carey, according to a CNET report. "We have no choice but to develop business solutions that ensure we continue to remain in the driver's seat of our own destiny. One option could be converting the Fox broadcast network to a pay channel, which we would do in collaboration with both our content partners and affiliates."

He said the broadcaster-plaintiffs, which include ABC, CBS, and NBC as well as Fox, will continue to fight the Aereo case in court. The networks get paid by cable networks that carry their content over their wires, and they're arguing that Aereo shouldn't be allowed to start a TV-over-Internet business without their permission.

"Aereo is stealing our signal," he said. "We are going to pursue our legal rights. And we believe we will prevail."

The idea that Fox would actually get out of the broadcast TV business certainly seems like bluster rather than a real strategy. But Carey did promise a full-court press, suggesting that if network lawyers can't win the day, its lobbyists may start working overtime. "We will pursue our rights fully both legally and politically," he said.

Aereo responded with a statement pointing out that Fox seems to have forgotten the bargain it entered into when it decided to get into the TV broadcasting business to begin with—that over-the-air content will always remain free. "Having a television antenna is every American's right," an Aereo spokeswoman said in a statement.

I am continually disappointed by the refusal of content providers to adapt to and adopt the growing use of alternative distribution methods. People are begging for companies to take their money and yet these companies fear new distribution.

Carey said the subscription revenue that his company, which owns Fox Broadcasting, gets from cable companies is absolutely vital.

I'm pretty sure re-transmission revenue from cable and satellite didn't start coming in until a few years ago, less than 10 years ago at the most. This isn't some longstanding tradition that they've built up over time. This was a recent cash-grab from cable companies and satellite providers.

Then stop broadcasting and dig your own grave; no one will care. Welcome to a market economy, where you can either be innovative and adapt to market forces or you can choose to cling to outdated business models and whine and cry about how the world is just so unfair.

Excellent news Fox. Please feel free to leave your broadcasting licenses at the door on your way out. We'll make sure those channels get to someone who actually can figure out how to run a ad-supported OTA television network.

This would be great! All that valuable spectrum would be returned to the public, making it usable for long range high-speed Internet connectivity. Is there some way we can encourage Fox to do this no matter what the ruling on the Aereo case?

I am continually disappointed by the refusal of content providers to adapt to and adopt the growing use of alternative distribution methods. People are begging for companies to take their money and yet these companies fear new distribution.

This. It keeps happening over and over, especially in content industry (news papers music movies). The people at the top seem too inflexible to adapt to new technologies, technology which in turn causes a shift in the way their users consume the content. Get off my lawn? I mean, is it as simple as a crotchety old man in charge? There's HEAPS of money to be made here. Instead, they are spending heaps of money on lawyers and lobbyists in an ultimately futile effort to prevent a market shift.

We simply cannot provide the type of quality sports, news, and entertainment content that we do from an ad supported only business model

Ha ha. Quality... That's a good one.

So instead, your "quality" programming is subsidized by people over paying for some limited content the really want, like HBO or NFL, which to access they need to pay for "quality" like TMZ and Fox and Friends.

The reason the model is under threat, is that 98% of TV content is garbage.

There's a lot of comprehension failure on the comments. Fox is not considering discontinuing all programming, just OTA content delivery. FoxNews, for example, is already cable-only. All of us have a sleeve full of snarky comments about not missing Fox and letting the door hit them on the way out, but there's deeper things to consider here.

Geeklaw wrote:

I am continually disappointed by the refusal of content providers to adapt to and adopt the growing use of alternative distribution methods. People are begging for companies to take their money and yet these companies fear new distribution.

I'm in agreement, but I have to be somewhat sympathetic over Fox's Luddite philosophy. The OTA business model has been deprived of just about every angle of profitability since the onset of video on demand. While when it comes to consumer entertainment, this means very little to the actual consumers. Most of us either get content delivery over the internet or via a third party (cable and satellite providers) already anyways.

But, look at this from a different perspective. Let's take OTA television out of the picture entirely for just a moment (which I know isn't really on the table since I doubt any of the other four will stop doing it). There's two things we just lost, even if the network itself continues other methods of content delivery: local news and local advertisements. Additionally, the Emergency Alert System loses the majority of their visibility since those providers no longer have to display local alerts.

Now, Fox saying they'll exit the OTA market has all the seeming of a three year old who hasn't learned how to share, but if it actually happens and other networks follow suit, there's a lot of things on the local level which will be forced to adapt.

This is such a horrible argument. If over the air, ad only supported TV is not profitable, then why broadcast? If their argument is true, then the executive team at Fox broadcasting should be fired, because the shareholders would get much higher value with all the money they could save by turning off their antennas and going cable/satellite only.

Never used Aereo but I personally use http://www.ustvnow.com/They give you free access to all local channels like fox, nbc, cw, cbs, and abc. And for $20 a month you get basic cable programming like FX, USA, TBS, TNT, Comedy Central, ESPN, and more...

I am continually disappointed by the refusal of content providers to adapt to and adopt the growing use of alternative distribution methods. People are begging for companies to take their money and yet these companies fear new distribution.

The issue here is not a failure to adapt. The problem is that they aren't getting a cut.

How could they be expected to embrace a technology that gives away their product?

Easy, by doing it themselves. OFFER IT. Game of Thrones is the single most pirated anything, ever. Do you know how much it would cost me to legitimately get Game of Thrones? I'm not sure, but it's somewhere in the vicinity of $80/mo, because I do not have cable television. If HBO offered to let me purchase access to HBOGO for the standard access rate of $15 (or whatever it costs to add HBO to a TV Package), then want to know what I would do? I would buy it.

Gabe Newall said it best, piracy is, fundamentally, a service issue. If you offer better service than the pirates, people will pay you. The proof is in the pudding, Steam is successful in Russia, a market traditionally very difficult for software to be profitable in because of piracy. Music piracy was a huge deal until iTunes made it feasible to actually buy it instead of just having to pirate it. Pirated TV and Movies were quite a bit bigger an issue before Netflix, Hulu, ect. (yes, I know Aero isn't exactly piracy, but that's what News Corp is viewing it as)

PEOPLE WANT TO BUY. People that can't buy, or people who don't see the value in buying, won't buy(I'm not spending $50 on a movie. It's just not gonna happen).

I would love to be able to pay $8/mo and get local channels through cable. I cannot. If Aero moves in, I will be able to. It's as simple as that.

There's a lot of comprehension failure on the comments. Fox is not considering discontinuing all programming, just OTA content delivery. FoxNews, for example, is already cable-only. All of us have a sleeve full of snarky comments about not missing Fox and letting the door hit them on the way out, but there's deeper things to consider here.

Geeklaw wrote:

I am continually disappointed by the refusal of content providers to adapt to and adopt the growing use of alternative distribution methods. People are begging for companies to take their money and yet these companies fear new distribution.

I'm in agreement, but I have to be somewhat sympathetic over Fox's Luddite philosophy. The OTA business model has been deprived of just about every angle of profitability since the onset of video on demand. While when it comes to consumer entertainment, this means very little to the actual consumers. Most of us either get content delivery over the internet or via a third party (cable and satellite providers) already anyways.

But, look at this from a different perspective. Let's take OTA television out of the picture entirely for just a moment (which I know isn't really on the table since I doubt any of the other four will stop doing it). There's two things we just lost, even if the network itself continues other methods of content delivery: local news and local advertisements. Additionally, the Emergency Alert System loses a majority of their visibility since those providers no longer have to display local alerts.

Now, Fox saying they'll exit the OTA market has all the seeming of a three year old who hasn't learned how to share, but if it actually happens and other networks follow suit, there's a lot of things on the local level which will be forced to adapt.

The OTA business model is less profitable now because there are less viewers. The arguments here are flawed, because Aereo is bringing back viewers which actually makes OTA more profitable.

The reason Fox is Aereo is because distributors like Aereo allow more people to drop cable subscriptions. Cable subscriptions allow Fox to double dip due to cable fees + ads. But like I said in another post, if OTA were really unprofitable, then Fox should sell the spectrum and make Millions dumping an "unprofitable OTA business".

In all seriousness, can somebody explain to me how a service that only lets you watch broadcast TV cuts into cable revenues? Is it that common to buy the local-channels package in NYC?

I believe that even the most basic cable subscription still kick up some money to the stations. Cable subscriptions allow the TV channels to get paid for the subscription + the ads. OTA only gets money for the ads.

It reminds me of an article I read just a few days ago that was re-printed from 1951 about how television could be doomed to failure if they couldn't figure out profitability soon. Clearly they did back then. They can do it again now. New media delivery formats are not going away. They can either literally stop being "20th Century Fox" and come into the 21st century or they can languish behind and further whine over their inability to modernize.

I believe that even the most basic cable subscription still kick up some money to the stations. Cable subscriptions allow the TV channels to get paid for the subscription + the ads. OTA only gets money for the ads.

Yeah, but if you want cable, it's usually not just for the basic channels. It's to get the stations you can't get over the air, and thus, can't get through Aereo either. How does this service decrease cable subscriptions when they're not carrying any cable content?

There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back.